March 2014 archive

I had the distinct pleasure of being around for all of poblano’s career on Daily Kos.  I must admit he wasn’t my favorite author, not because I had any particular beef with him, but because I just wasn’t interested in his subject matter.

You see I find electoral horse race diaries dull beyond description and am much more interested in policy and good governance than the politics of personality.

Still, he’s an interesting case study.  When he came he was a sports statistician and a proponent of the then novel Sabermetrics system of analysis.  His particular contention was that the same techniques could be applied to political polling and give you a quite accurate prediction of the outcome of any given contest.

Some people were offended by his results since their perceptions were rose tinted by wishful thinking and at times discussion in poblano’s diaries became quite heated.  When he came out as Nate Silver and got picked up (along with his blog FiveThirtyEight which I feel was established partly as a reaction to his reception at dK) by The New York Times I’m sure he was not sorry to shake the dust off and go.

During the 2012 election cycle kos followed Nate’s predictions quite closely and with good reason as he has a remarkable record of success-

The accuracy of his November 2008 presidential election predictions-he correctly predicted the winner of 49 of the 50 states-won Silver further attention and commendation. The only state he missed was Indiana, which went for Barack Obama by one percentage point. He correctly predicted the winner of all 35 U.S. Senate races that year.

…

In the 2012 United States presidential election between Barack Obama and Mitt Romney, he correctly predicted the winner of all 50 states and the District of Columbia. That same year, Silver’s predictions of U.S. Senate races were correct in 31 of 33 states; he predicted Republican victory in North Dakota and Montana, where Democrats won.

Of course kos got results nearly as good by simple poll averaging, no complicated weighting required.

In July of last year Nate picked up his site and moved to ESPN where, while he still talks about politics, he is much more sports focused.

It seems we have a celebrity feud brewing between poblano and Herr Doktor Professor.

The real problem with Nate Silver’s attack on Paul Krugman

By DYLAN BYERS

3/27/14 11:48 AM EDT

Nate Silver took a not-so-veiled shot at his former New York Times colleague Paul Krugman on Wednesday, suggesting – through some tongue-in-cheek empirical analysis – that the columnist had taken a more critical attitude to Silver following his move to ESPN.

“Mr. Krugman’s views of FiveThirtyEight have changed since it re-launched March 17 under the auspices of ESPN,” Silver wrote. “To be sure, the difference in Mr. Krugman’s views could reflect a decline in quality for FiveThirtyEight. The web site has brought on almost two dozen new employees and contributors. And it has expanded its coverage beyond politics into sports, economics and other areas.”

The problems with Silver’s attack are manifold: One, it’s petty. Two, it’s snarky. Three, it’s self-centered. Four, it eschews objectivity in favor of personal gripes. Five, it uses data to infer, rather than deduce: Silver suggests Krugman has become a critic because Silver is no longer at the Times. He might pause to wonder if the shift in tone is due, at least in part, to the fact that Silver spent a year hyping up a site that has yet to live up to expectations, and that, in the meantime, he badmouthed columnists like Krugman as “worthless.”

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Silver doesn’t care about being first or breaking news – fine, he doesn’t need to. But he needs to at least be relevant. So far, Silver’s site has achieved relevancy just twice – once with his March Madness picks, which were largely useless, the second time with his Senate predictions, which reportedly scared the bejeezus out of Democrats. But aside from these “events,” there is little reason to check in with FiveThirtyEight on a daily basis, unless you’re an adoring fan.

Now the truth is I haven’t been to FiveThirtyEight so I have no idea whether any of this is so or not.  I remember poblano as a pretty mild and even-tempered guy unless you started messing with his data.

As nearly as I can figure Herr Doktor Professor’s (who I do read every day) main criticism is that the Fox/Hedgehog analogy is inapt because poblano’s entire history and fame rests on the fact he’s a Hedgehog who endlessly repeats his one big truth which is that the data is what it is, something that’s completely in line with my interactions with him (not that there were many).

To disclose my personal bias, I recently wrote this-

I have my disagreements with…

Herr Doktor Professor and normally when I do I focus on other economists who understand the problem more clearly or are more forceful in their expression.  In today’s piece I don’t disagree with this-

The case for stimulus was that we were suffering from a huge shortfall in overall spending, and that the hit to the economy from the financial crisis and the bursting of the housing bubble was so severe that the Federal Reserve, which normally fights recessions by cutting short-term interest rates, couldn’t overcome this slump on its own. The idea, then, was to provide a temporary boost both by having the government directly spend more and by using tax cuts and public aid to boost family incomes, inducing more private spending. Opponents of stimulus argued vociferously that deficit spending would send interest rates skyrocketing, “crowding out” private spending. Proponents responded, however, that crowding out – a real issue when the economy is near full employment – wouldn’t happen in a deeply depressed economy, awash in excess capacity and excess savings. And stimulus supporters were right: far from soaring, interest rates fell to historic lows. … So why does everyone – or, to be more accurate, everyone except those who have seriously studied the issue – believe that the stimulus was a failure? Because the U.S. economy continued to perform poorly – not disastrously, but poorly – after the stimulus went into effect. … But that’s all water under the bridge. The important point is that U.S. fiscal policy went completely in the wrong direction after 2010. With the stimulus perceived as a failure, job creation almost disappeared from inside-the-Beltway discourse, replaced with obsessive concern over budget deficits. Government spending, which had been temporarily boosted both by the Recovery Act and by safety-net programs like food stamps and unemployment benefits, began falling, with public investment hit worst. And this anti-stimulus has destroyed millions of jobs. In other words, the overall narrative of the stimulus is tragic. A policy initiative that was good but not good enough ended up being seen as a failure, and set the stage for an immensely destructive wrong turn.

Indeed D.C. is still in the thrall of freshwater monitarists who have been constantly and consistently wrong for 40 years to the exclusion of all competing points of view and the only solutions considered by either party have such low multiples as to be almost entirely ineffective.

Fiscal policies work to increase demand and economic activity.  Monetary policies don’t work except to contain inflation.  Period.

Moreover Herr Doktor Professor argues that these conditions apply only at low interest rates (zero lower bound) and that money can be created only through the Federal Reserve action (demonstrably false, a Department store can create money), but this is not a discussion of MMT.

The Shrill One has consistently argued, against steadfast and vociferous criticism, for fiscal not monitary policy action and for actions with higher economic multipliers.  I don’t have his back, but I think he deserves a little credit for that.

We can educate him about modern banking and the money supply later.

In the mean time we could do (and have done) worse with our policy decisions than to bury Mason Jars of currency in abandoned coal mines and let companies bid for the rights to do that and pay people to do that and other companies bid for the rights to dig them up and pay people to do that too.

Or as Atrios suggests we could just give everyone some free money which has less impact on the environment.

The point is that “stimulative” action should be stimulative and not just encourage the coupon cutting class to sit on their stash and persue asset bubble after asset bubble.

The problem is inequality.

Now I strongly suspect Herr Doktor Professor and I have very serious disagreements “about modern banking and the money supply”, but he was quite polite to me when he signed my copy of his book and I told him I had studied Samuelson.  I leave it for you to decide if his attitude toward poblano has changed.

* Math Is Hard November 4, 2012, 3:08 pm

* Trivial Stakes November 6, 2012, 5:29 pm

* The Real Real America November 7, 2012, 2:08 am

* Power-Mad Conservatives November 7, 2012, 7:08 pm

* Deficit Hawks Down – Please November 8, 2012, 9:00 pm

* Unqualified November 10, 2012, 4:19 pm

* The 2012 Election, Reenacted November 21, 2012, 5:28 pm

* The Stiffs and the Players November 27, 2012, 7:23 am

* Notes on Epistemic Closure November 30, 2012, 7:30 pm

* The Non-Surge in Government Spending January 22, 2013, 5:00 pm

* Nate Silver, Superstar August 5, 2013, 6:40 am

* Sergeant Friday Was Not A Fox March 18, 2014, 7:55 am

* Further Thoughts on Hedgehogs and Foxes March 18, 2014, 4:15 pm

* Tarnished Silver March 23, 2014, 10:48 am

* Data as Slogan, Data as Substance March 26, 2014, 1:00 pm

I’m actually far more concerned that poblano’s science guy is a climate change denialist.

Tonight’s Games

Saturday’s and Sunday’s Results below the fold.

The Limits Of Conciliation Revisited

By Charles P. Pierce, Esquire

on March 27, 2014

In merciful brief, the president attempted to explain to the world why the self-destructive and mendacious decision of the United States to engage in aggressive war in Iraq in contravention of god alone knows how many provisions of international law was manifestly different — politically, legally, and morally — from Vladimir Putin’s land grabbing in and around Ukraine. Before anyone gave him a chance to be president, and throughout his unlikely rise to the White House, the president famously called the war in Iraq “the wrong war in the wrong place.” It was the first stark difference between the president and Hillary Clinton in the 2008 Democratic primary campaign and the clearest difference between the president and Senator John McCain in that year’s general election. It represented the cleanest break available to the country from the bloody stupdity of the previous administration. It was the seedbed for all the hope and all the change. The problem arose when the architects of the American fiasco were allowed to escape any real accounting for what they’d done in Iraq and to the United States. There was no public punishment, no public shaming, no indication from the new administration that it was ready to demand penance from the old. And yesterday, the president illustrated quite clearly the size of the corner in which his basic philosophy had painted him.

The case he made was preposterous.

…

He knows so much better than that. The case we made before the U.N. was a insult to the world, built on stovepiped intelligence, wishful thinking, and outright bullshit, and delivered by Colin Powell because, as Dick Cheney put it so eloquently, Powell could lose a couple of points off his poll numbers. He knows that the Bush people were going into Iraq even without the U.N. — which, of course, it eventually did. (Digby handled this with her usual aplomb.) He knows we made Iraq take its oil industry private, and he knows why. He knows who the profiteers are, and he knows into whose pockets the oil revenues descended. They are the people he inexcusably let off the hook by looking forward and not back, and by offering them and the country absolution without first demanding penance. (For all her other faults, Holy Mother Church at least gets the order right.) All of these things make up what he once called “the wrong war.”

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He also knows very well why the riposte about America in Iraq to any attack on Russia in the Crimea has such a sting. It has a sting because it is almost entirely accurate. The destruction of American credibility in the areas of foreign affairs and international law that was wrought by our criminal occupation of Iraq will cost us decades to repair. The rest of the world, most of which declined to participate in our excellent adventure, doesn’t have to listen to our preaching on those subjects without snickering. The president yesterday sought to rouse the outrage of the world against Russia through what were essentially debating points. If he had demonstrated, early and loudly, that he was going hold the perpetrators accountable for the crimes they committed in the previous administration, that he was going to call them to account for their lies, their greed, and their basic disregard for democratic norms and for the standing of the United States in the world, if he had demanded penance before absolution, then, maybe, he could have given yesterday’s speech and not looked and sounded so damned bizarre. As it was, it was less a speech than it was an elegy, a sad eulogy for missed chances and lost, golden promises.

Another Financial Crisis Is Looming-Here’s Why and How It Will Play Out

By David Dayen, AlterNet

March 26, 2014

So are we on the precipice of another financial crisis, and what will it look like?

To be sure, danger still lurks in the mortgage market. The  latest get-rich-quick scheme, with private equity firms buying up foreclosed properties and renting them out, then selling bonds backed by the rental revenue streams (which look suspiciously like the bonds backed by mortgage payments that were a proximate cause of the last crisis), has the potential to blow up. And continued shenanigans with mortgage documents could lead to major headaches. A new court case against Wells Fargo uncovered a bombshell, a step-by-step  manual telling attorneys how they can fake foreclosure papers on demand; the fallout could throw into question the true ownership of millions of homes. Even subprime mortgages are in the midst of a comeback, because what could go wrong?

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Recent actions from the Federal Reserve suggest that they are thinking about guarding against financial instability, amid concern that microscopic interest rates and expanded balance sheets have fed speculation. In addition, the Securities and Exchange Commission recently began looking into leveraged loans that have been packaged into bonds known as collateralized loan obligations, or CLOs. These CLOs are traded privately between buyers and sellers, so regulators cannot discern whether they hide risks, or whether the sellers cheat the buyers on prices. And some of them are “synthetic” CLOs – derivatives that are basically bets on whether the underlying loans will go up or down, without any stake in the loans themselves. Recently, commercial banks have attempted to get CLOs exempt from the Volcker rule, the prohibition on trading with depositor funds. CLO issuance has skyrocketed since this lobbying push, and it could be the next vessel Wall Street uses for their gambling activities.

But whether the SEC will actually enforce securities laws on CLOs, and drive them out of the shadows, remains to be seen. And other examinations of shady derivatives deals and price-fixing, if past history is a guide, will end with cost-of-doing-business settlements instead of true accountability. Meanwhile, we are told that the economy has little to fear from big bank failures. The Federal Reserve recently released results of its stress tests on the 30 biggest banks; it claims that 29 of them would hold up in the event of a deep recession. But the stress tests, designed in conjunction with the banks subjected to them, do not realistically measure the reality of a financial crisis, and if they did, the banks would all fail them.

Ultimately, we don’t yet know exactly where the next financial crisis will emerge. But we do know how the conditions for future crises get set. When law enforcement fails to prosecute Wall Street for prior misdeeds, they give no reason for them to curb their behavior.

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Similarly, the size and power of the largest financial institutions, which has only grown since the crisis, virtually guarantees similar outcomes. Congress and the White House have not yet moved to chop these behemoths down to size; as a result, their sprawling corporate structures and inadequate risk controls make them almost unmanageable.